IOC to Own Crude and LPG Ships as Hormuz Disruption Pushes Up Freight Costs
Indian Oil Corporation (IOC), India's largest oil refiner and a public sector company, plans to buy its own crude oil tankers and LPG (cooking gas) carriers. Its board has already approved buying a few ships, and tenders were issued some months ago.
IOC is also exploring building ships inside India, under the Make in India push. It is looking at three paths: improving its current charter deals, owning ships, and supporting Indian shipbuilding.
The reason is the conflict in West Asia. Attacks and threats near the Strait of Hormuz have pushed up freight rates (the price of hiring a ship) and war-risk insurance costs.
IOC now has 3 crude tankers and 9 LPG carriers on time charter (hired for a fixed period). These cost about USD 2 to 2.50 per barrel, while ships hired on the spot market cost up to USD 8 to 10 per barrel. Spot LPG freight has jumped from a normal USD 40 per tonne to USD 160 to 180 per tonne.
IOC has also spread out where it buys crude. In the first half of 2026-27, about 55% came from Russia, 24% from the Middle East, about 10% from Africa, 7% from Brazil, and smaller shares from the United States and Venezuela. Spot purchases rose to about 87% of its crude buying, from about 50% the year before.
IOC raised its crude stocks to about 39 days of use (from the usual 33 to 35 days), and holds about 20 days of LPG and 23 to 25 days of petrol and diesel. The Indian basket of crude averaged about USD 120 per barrel in October 2026, against USD 65 to 70 in February.
India's Energy Security and Import Dependence
Energy security means a country can always get the energy it needs, at a price it can afford, without sudden breaks in supply. India imports close to nine-tenths of the crude oil it uses, and well over half of its LPG. So any trouble on the sea routes from West Asia quickly hits Indian fuel prices, the government's budget and the rupee. India tries to stay safe through several tools: buying from many countries, keeping emergency stocks, signing long-term deals and building its own supply chains.
IOC's plan shows energy security now includes the ships, not just the oil. By spreading its crude buying across Russia, Africa, Brazil and the Americas and raising stocks to about 39 days, IOC is using the classic tools. Owning tankers adds one more layer: control over how the oil reaches India.
Strait of Hormuz: Geography and Strategic Significance
The Strait of Hormuz is a narrow sea passage between Iran in the north and Oman in the south. It joins the Persian Gulf to the Gulf of Oman and then the Arabian Sea. It is the only sea exit for most of the oil and gas exported by Gulf countries such as Saudi Arabia, Iraq, Kuwait, Qatar and the UAE. That is why it is called the world's most important oil chokepoint.
The disruption near Hormuz is the direct cause of the jump in spot freight and insurance costs that IOC described. Because so much of India's oil and LPG has to pass through this one narrow strait, Indian refiners are now trying to buy from farther regions and to secure their own ships.
Maritime Shipping Economics: Tankers, Freight Rates, and War Risk Premium
Almost all the crude oil and LPG that India imports comes by sea, in special ships called tankers and gas carriers. The money paid to move this cargo is called freight. Freight is not a fixed price. It rises and falls every day with demand, supply of ships, fuel costs, and the danger on the route. Understanding how ships are hired, priced and insured explains why a war far away can raise the price of petrol and cooking gas in an Indian town.
IOC's numbers show this concept at work. Its time-chartered tankers cost about USD 2 to 2.50 a barrel, while spot ships cost up to USD 8 to 10 because of the Hormuz crisis and higher war-risk premiums. Spot LPG freight has risen about four times. Owning ships, and keeping some on time charter, is IOC's way to lock in costs and avoid being at the mercy of the spot market.
Shipbuilding Financial Assistance Policy and the Shipbuilding Development Scheme
The Shipbuilding Financial Assistance Policy (SBFAP) is a Government of India scheme that gives Indian shipyards a cash support for every ship they build. The idea is to cover part of the cost gap between Indian yards and big foreign shipbuilders in China, South Korea and Japan. The first version ran from 2016 to 2026. In 2025 it was revamped and extended, and joined by a Shipbuilding Development Scheme that builds shipyard capacity.
IOC wants to explore building its crude and LPG carriers in India. The revamped shipbuilding scheme is what makes this possible on cost, because the government pays part of each ship's price to the Indian yard. Large orders from public sector oil companies could give Indian shipyards the steady demand they need to grow.
- IOC fleet on time charter: 3 crude tankers and 9 LPG carriers
- Time-charter crude freight: about USD 2 to 2.50 per barrel; spot: up to USD 8 to 10 per barrel
- LPG spot freight: USD 160 to 180 per tonne, against a normal of about USD 40 per tonne
- IOC crude sources, H1 2026-27: Russia about 55%, Middle East 24%, Africa about 10%, Brazil 7%, US 2 to 5%, Venezuela 3 to 4%
- Spot purchases: about 87% of IOC's crude buying in H1 2026-27 (about 50% the previous year)
- IOC inventories: crude about 39 days (normal 33 to 35); LPG 20 days; petrol and diesel 23 to 25 days
- Indian basket crude: about USD 65 to 70 per barrel in February 2026; about USD 120 average in October 2026
- IOC net profit, September 2026 quarter: ₹21,630 crore; gross refining margin USD 18.52 per barrel
- India's crude import dependence: about 88% (88.2% in 2024-25)
- India's freight bill to foreign shipping lines: close to USD 75 billion a year
- Shipbuilding package (September 2025): ₹69,725 crore; scheme runs till 31 March 2036